Third Party & Independents Archives

Free Trade Doesn't Work

Next week FED Chairman, Bernanke will meet to decide whether it is necessary to crank up another stimulus to save us from the effect of 25 years of ‘free trade’ policies/agreements. While a large stimulus would lower long term interest rates it carries the risk for increasing inflation. The big question is, would China, the world’s second largest economy, continue to buy treasury bonds.

The sound bite ‘free trade’ can be representative of what one chooses to believe about free trade. Similar to the much used ‘social justice’ term, the meaning can cover about anything from canned beer to nuclear holocaust. Free trade, as it is presented to the people, has never existed, does not exist and can never exist. Free trade is nothing more than a feel good phrase, all encompassing which has served the purpose for a so-called free trade policy. Recently, read a book by Ian Fletcher, “Free Trade Doesn’t Work’.

Edward Luttwak wrote the foreword and made the point that when the US pressed our trading partners to help out with stimulus spending to prevent further economic decline in early 2009, every major Europeans nation, save Britain, refused to cooperate.

Fletcher writes that free trade, as practiced by the globalized world today, is nothing short of a ‘free for all’ where every nation is self serving, acting in every way possible to ‘protect’ their markets and thus, their prosperity. He writes that governments treat trade as war and use every trick in the book to grab their industries a competitive advantage. In India foundry workers often don’t wear socks, shoes, protective headgear, ear plugs or even eye protection. Often wearing no more than boxer shorts, they squat next to the roaring furnaces. Thousands of foundries in China run on industrial-grade coke with no pollution control devices on their smokestacks, creating a plume of smoke across the pacific that can be seen on satellite photos. The average wage for a Chinese factory worker is 57 cents/hr. One Goodyear VP put it, “until we get real wage levels down much closer to those of the Brazils and Koreas, we cannot pass along productivity gains to wages and still be competitive.”

Yesterday’s Washington Post contained several articles that correctly relate to our failed free trade policy. Recently we debated on the news that General Electric was closing their last incandescent light manufacturing facility in Winchester, Virginia and laying off 200 workers as incandescent lighting will be replaced, by law, with more energy efficient Compact fluorescents. Because the manufacturing process for CFL’s is labor intensive GE cannot compete with cheap labor markets. GE will continue to make incandescent in Mexico and China.

Fred Maxik founded Lighting Science Group and is looking to market a new LED light that would be yet more energy efficient than the CFL. As the company looks to expand on this next-generation lighting they are being courted by Mexico and China, offering low wage workers and significant cash incentives for capital equipment. The U.S. has offered financing under the stimulus program, but the process has proved too cumbersome for the small company. Incentives are ‘a game that foreign govt’s are playing but the U.S. isn’t’, according to their Chief Executive Officer.

A U.S. mfctring base has a number of advantages; culture of innovation, universities and a well-trained work force, roads, ports and airports infrastructure. Most compelling is access to a skilled workforce. About 70% of the company’s workers once worked for NASA or one of their contractors. Even so, the company is moving to do more mfctring in Asia and Mexico involving other product lines. It is working with contract mfctrs in China and negotiating to lease a 65,000 square foot plant in Monterrey, Mexico. There, wages are about one-quarter of U.S. wages and, there is the offering of cash incentives.

The U.S. has offered a $19M stimulus bond enabling the company to go to a lender and borrow at the cheapest rate. But, the company chose not to go that route as private lenders required unaffordable levels of collateral. Other strings require the writing of proposals about future plans with still more strings attached.

The role of offering incentives is usually left to the states and municipalities, which typically have far smaller budgets than national govt’s they are competing with. The U.S. usually doesn’t offer direct incentives but the rest of the world does. U.S. policymakers are divided on the extent to which the federal gov’t should counter direct investment offers. Critics say the federal gov’t is picking winners, yet many are worried about the steady decline in U.S. mfctring employment. “As we’ve decided to vacate various areas of technology – saying “It’s cheaper to build it there, let’s move it away’ – we’ve created a vacuum” that weakens the nations’ capacity for innovation, Maxik said. He alludes that as you start moving the mfctring process further and further away from the center of innovation you lose that connection.

Does this process meet your definition of ‘free trade’?

Japan, for the first time in six years on Wednesday intervened in the foreign currency market, buying dollars to try to weaken the yen and lowe4r the price of Japanese exports overseas. The yen has slid ten percent against the dollar this year, reaching a 15-year high. By buying dollars and selling yen the authorities soon had the yen valued at $4.50 and falling.

Immediately this brought a response from Congressman Levin (D-Mich), calling the move “deeply disturbing” as he opened a hearing on China’s currency practices. He related that having a second nation intervening in currency policy was a sign that the Obama admin’s efforts to police the economy through the International Monetary Fund was not working stating, “there does not appear to be anything remotely approaching an international agreement to end predatory exchange rate policy.”

This move could make U.S. exports more expensive abroad at a time when the administration is pushing to increase them. However, this releases pressure from Japan’s exporter’s. Toyota has said that it loses 30 billion yen (about $350 million) for every one-yen gain against the dollar. Japan is suffering from a two-decade-old economic slumber and their economy was recently surpassed by China’s as the world’s second largest.

Recently, Treasury Secretary Timothy Geithner criticized China’s economic policies for having a negative impact on our economic interests in stating that China “encourages outsourcing of production and jobs from the U.S., makes it more difficult for goods and services produced by American workers to compete with Chinese-made goods and services in China, the U.S. and third countries”. In particular, China’s management of its currency is cited as a central problem that keeps Chinese goods cheap on work markets.

Geithner says he prefers to deal with China diplomatically rather than through the WTO. Geithner had met with the Chinese subsequently and they had ‘promised’ to all the renminbi to float more freely. Since then there has been no change and, by some measures, the currency has gotten weaker still.

Like Henry Paulson before him, I would give both men an F- for their effort to affect any measurable change in China’s trade actions. Indeed, China is becoming more aggressive in their foreign policy, taking a much harder position on demarcation lines in the Yellow Sea and Sea of Japan.

And, get this ‘free trade’ action: Most are familiar with the ongoing ‘free trade’ fight in building the next generation aerial refueling tanker for the U.S. Air Force. The Air Force has been working to replenish their older tanker fleet in service since the Eisenhower administration. To do so pre-free trade would have been a simple bid between a couple of U.S. companies like Boeing, Lockheed and Northup Grumman. However, the effort has been ongoing since about 2000 and still the ‘free trade’ battle looms large with the U.S, Europeans and the Russians fighting for a slice of the pie.

Most recently, the WTO ruled Wednesday that Boeing is guilty of illegal subsidies from the U.S. gov’t. This comes after the WTO ruled three months ago that the French-based Airbus, EADS, had an unfair advantage in the bid from billions received in low interest gov’t loans to develop the aircraft. The European Union is claiming that Boeing received about $20 billion in tax breaks, research aid and other subsidies from the U.S. gov’t. Ministers in France said the ruling “condemns massive subsidies to Boeing that violate WTO rules.” A ‘final ruling’ by the WTO is expected in ‘several’ months.

This supposedly represents ‘free trade’ with built in efficiency brought about by harmonized security, administrative and trade laws to grease the trade skids. How likely is it that the Corpocracy will back off on their ‘free trade’ policies? IMO, it’s very unlikely so long as the U.S. taxpayers can be played for the world’s suckers as they have been for the past 25 years. Because the whole ‘free trade’ thing violates the U.S. Constitution a treaty has never been passed through Congress. Free trade could be dismantled tomorrow by the stroke of a pen revoking an Executive Order on which the disastrous trade policy hinges.

The Republic Sentry Party advocates for a move away from Free Trade to a policy based on fair trade. Another debate at another time.

Posted by Roy Ellis at September 17, 2010 7:31 PM
Comment #308743

Roy, in answer to your Big Question, yes, China would still buy U.S. treasuries to help insure the economic viability of its largest export trading partner in the near term. That is one of the strengths of globalization of markets - the interdependence. But, of course, globalization of markets also carries higher risks and liabilities as we saw with the onset of our own Recession and financial sector meltdown, which spread around the globe in domino effect before being halted by central bank intervention.

Though, your point is well made - we are engaged in a game of Russian Roulette as far as pushing our debt boundaries ever further out, cantilevered so to speak in the future beyond the support capacity of foreign treasury buyer’s own best and self-interests. The FED is of course, calculating that carrying capacity as accurately as they can in the attempt to balance present demand for economic stimulus which could slow the rate of growth of debt (increase revenues) as stimulus takes hold, against the borrowing capacity threshold of failure, especially as a result of inflationary pressures. That is the FED’s primary function after all, to maximize economic activity while keeping inflation in check.

I suspect however, the FED will determine that inflation risks are still quite small, and the need for increasing economic activity very great. Hence, the stimulus will be forthcoming.

Posted by: David R. Remer at September 18, 2010 4:18 PM
Comment #308750

“I suspect however, the FED will determine that inflation risks are still quite small, and the need for increasing economic activity very great. Hence, the stimulus will be forthcoming.”

I think that the Fed has signaled very clearly that it will take additional monetary stimulus actions if the federal government fails to maintain fiscal stimulus. It is also clearly concerned about deflation or at least less than optimal inflation. However, monetary stimulus has not been very effective in this deep recession. Short term interest rates were already low and there wasn’t much room to manuver. Also, the quantitative easing actions and other actions to increase the base money supply have not been very effective due to the lack of velocity in the credit markets. A number of economists have referred to this recession as a balance sheet recession. The private sector is attempting to deleverage from excessive debt and save, it is not going into new debt. So, the Fed can lower long term interest rates and increase the base money supply but if nobody is interested in borrowing the impact is not significant. In other words, you can lead a horse to water but you can’t make him drink. That is why some, including Bernanke, are very concerned about the premature withdrawal of fiscal stimulus, a la Roosevelt in 1937.

Posted by: Rich at September 18, 2010 5:34 PM
Comment #308764

Rich, that is an accurate assessment of what several FED governors have reported, as the current position of the FED and economy at this point. The balance sheet recession, however, was followed by consumer spending recession, which is beginning to bounce back, making the recession recovery pretty much beyond the reach of known methods to stimulate it any faster absent a massive infusion of cash into consumer’s and worker’s hands.

Recessions have a recovery pace dictated by the context of the recession. Politicians and private sector can, and will only do so much, which is nearly always insufficient to turn a recession around on a dime. The balance sheet recession makes this one all the more sluggish in returning, as it is shared by regional and local banks, small business, and consumers all at the same time.

Posted by: David R. Remer at September 18, 2010 6:26 PM
Comment #308774

Roy Ellis quoted: ““As we’ve decided to vacate various areas of technology – saying “It’s cheaper to build it there, let’s move it away’ – we’ve created a vacuum” that weakens the nations’ capacity for innovation, Maxik said”

This is the same point made by Andy Grove, of Intel fame, in a recent article about the necessity of US coporations remaining in the production and engineering phases of high tech manufacturing. His point was intuitively appealing: that innovation derives from an experiential base acquired in the actual development and production of products. Producers are more likely to be innovators than consumers or simple fianciers.

Posted by: Rich at September 18, 2010 7:44 PM
Comment #308807

Right Rich, common sense that innovation and mfctring are ‘hand and glove’ related.

A Wash. Post article relates that China imports more German manufactured big ticket equipment than does the U.S. Volkswagen sold 1.3M cars to China this year, five times the number sold to the U.S. market. Germany has proven that a rich nation can profit off China’s rise. Germany is out-exporting the U.S. to China by a factor of three to one. Germany does run a trade deficit with China but for the month of February they came within a billion dollars of having a trade surplus. The report states that Germany has funded ‘business centers’ to aid small and mid-size business in tapping the Chinese market, using gov’t money to support their Chamber of Commerce networks and boost trade. They have chosen to take a less confrontational approach to China on issues such as China’s exchange rate, copyright infringements, and instead focusing on sales.

Germany’s wage scale is on a par with the U.S. and the unemployment rate stands at around 7.6%. They are complaining of a labor shortage and the need to loosen immigration rules.

As to why the U.S. is less competitive in China’s market a German representative stated the U.S. has lost much of their industrial base. “Look at the state of machinery manufacturing in your country. There are nearly no important American makers left anymore, and most of the ones you have now are German subsidiaries. And then, look at the cars. Go ask the Chinese if they want to buy a BMW or a Ford.”

The U.S. is less competitive because of the WTO and the ‘free trade’ policy. Can anyone tell me why the U.S. elected to stick with a direct (income) tax while 150 some countries chose to go with the VAT, an indirect tax for trade? Under WTO rules a gov’ts rebate of an indirect tax is considered trade neutral while a rebate of a direct tax is considered a trade subsidy. Sticking with an income tax for trade puts the U.S. at an annual disadvantage of approximately $355 billion in international trade. In 2007 almost $230 billion was from other other gov’ts rebate of the VAT to their companies that exported goods and services into the U.S. These govt’s also created another $125 billion disadvantage when the imposed VAT-equivalent taxes on U.S. goods and services imported into their countries, taxes that were not rebated. This discrimination is a major cause of our trade deficit and has/is costing the U.S. millions of jobs. Does it have anything to do with breaking the back of the middle class so we become more like the ‘Brazils and Koreas’?

If a German vehicle exported to the U.S. is priced at $50k the German govt’ rebates to the mfctr 19% or $9500 allowing the vehicle to be priced at a little less than $40,500 in the U.S. Conversely, a car mfctr exporting to Germany must pay that gov’t 19% of the product price plus 19% tax on the cost of all transport, insurance, docking and duties involved in delivering the vehicle. A $50k Cadillac exported to Germany has more than $10k added to the price by the VAT for a total of $60k. German producers are able to cut their price in the U.S. by 19% and and increase the price of any U.S. made product by 19%. Today, a VAT is applied to almost 95% of all U.S. exports.

About 15% of trade is ‘free trade’. The remainder is hockey-pokey stuff.

The U.S. gov’t has made several attempts to level the playing field but now big corporations have moved offshore and lobby the gov’t to retain the VAT as it now serves their competitive advantage. The VAT is a major reason U.S. businesses have left for foreign shores, costing millions of jobs. Hard to keep a good Corpocracy down. Consumers-taxpayers, sorry you lose, BIGTIME!

Republic Sentry is advocating for a VAT trade tax and a flat income tax.

Otherwise, we have the Corpocracy we deserve.

Posted by: Roy Ellis at September 18, 2010 10:50 PM
Comment #308825

Greed is at the root of so many problems.

Manufacturing jobs have been leaving the U.S. for many decades, because:

  • Many other nations restrict imports into their nations;
  • Many other nations put higher taxes on imports into their nations;
  • The U.S. imposes low or zero taxes on imports from other nations;
  • The U.S. is importing cheap labor by the millions; too many despicable U.S. politicians and greedy U.S. employers are selling out American citizens in numerous ways. Government won’t prosecute illegal employers, or secure the borders because many Democrat and Republican politicians want cheap labor, and many Democrat politicians want the votes from voters they want to give another amnesty like the shamnesty of 1986 (which quadrupled the problem). Without internal enforcement too, a fence won’t stop the greedy illegal employers. For example, see this law firm (Cohen & Grigsby) that teaches corporations how to avoid hiring Americans (i.e. H-1B Visa abuse, and fake job advertisements). Also, the richest person in the U.S. (Bill Gates) wants the government to increase the limits on H-1B Visas so that more cheap labor can be imported (despite 1.5 Million foreign workers already being imported annually). The problem with this race-to-the-bottom model is that wages rise unless you continue to increase the inflow of cheap labor. How greedy is that? Therefore, the limits are continuously increased to depress wages. Many Republican and Democrat incumbent politicians are despicably pitting American citizens and illegal aliens against each other for profits and votes, disguised as compassion (which is severely misplaced at best).
  • The U.S. government rewards (via tax breaks and subsidies) to corporations that are moving jobs out of the U.S.
  • The U.S. government pillages the U.S. consumer and decimates American competitiveness;
  • The U.S. government favors continuation of the free trade globalization policies of recent Democratic and Republican administrations. They want no restraints on international trade, despite mounting U.S. trade deficits and loss of manufacturing jobs and loss of many professional jobs to low wage nations.
  • The U.S. government and the power elites running and ruining the U.S. have no interest in the future of the U.S., but only care about their own profits. Do you want to do something about it? Stop voting for FOR-SALE, greedy, arrogant Democrat and Republican politicians that support free trade globalization, massive importation of cheap labor, and illegal immigration. Use your consumer power: Stop pissing away your money on consuming more unnecessary imported cheap crap that serves to make the greedy cheaters and parasites richer. Start saving for that rainy day. And make no mistake; it is coming for most Americans. Yet, during this extraordinary breakdown in the American employment machine, politicians, government officials, corporate spokespersons, “free trade” economists, and other master cheaters and parasites gave assurances that America was benefitting greatly from the work Visa programs and outsourcing. Cha Ching!
  • Many “free trade” advocates are dependent on the corporate money that funds their salaries, research and think tanks.
  • Under pressure from venture capitalists, American start-up companies are starting up abroad. Thus, the new ventures, which the “free trade” economists assured us would create new jobs to take the place of the ones moved offshore, are in fact creating jobs for foreigners (not to mention, also training and educating our competition). Clearly, tax breaks for these greedy, back-stabbing parasites are self-defeating for the U.S., when the end result is to create jobs for foreigners, instead of Americans.
  • Many U.S. colleges and universities are giving many scholarships to foreigners.
  • As a consequence of so much betrayal and other manifestations of unchecked greed, technical jobs in the U.S. are falling as a percentage of the total. Many Americans are beginning to wonder if their educations were worth the cost (and debt). This deteriorating situation has obvious adverse implications for engineering and professional education in America. Between 1990 and 2005, the U.S. has been paying for its imports by giving foreigners ownership of its assets. In the last 15 years foreigners have accumulated $3.6 trillion of America’s wealth. And with $57 Trillion of nation-wide debt, there’s a lot of liquidation in progress. There are also record levels of foreclosures and bankruptcies.
  • In the past, U.S. companies employed Americans to produce the goods that Americans consumed. Employment supported sales, and sales supported employment. But no more. By our shortsighted greed, and the policy of moving U.S. jobs abroad, our corporations are destroying American markets. And we can’t all make a living cleaning each other’s laundry.
  • Economists give assurances that the U.S. dollar’s decline ( will bring jobs and industry back to the U.S., and once enough Americans are as poor as the people of many other nations are today, then process will reverse. Multi-national corporations will then locate back to the U.S. to take advantage of cheap labor and unserved markets. By becoming poor, the U.S. can become rich again. You might want to ask those economists and the FOR-SALE, corrupt, and incompetent politicians in Washington D.S. why we should put ourselves and many future generations through such a wrenching process? But then, the voters repeatedly reward Congress with 90% re-election rates!?!
  • “Free trade” is one thing, but we are not only getting sold out daily for profits and votes, but we are selling ourselves out too, by repeatedly rewarding Congress with 90% re-election rates. The wealth disparity gap is now as severe as it was in the Great Depression, in which the wealthiest 1% own over 40% of all wealth in the U.S.
  • There’s a big difference between “Free Trade” and “Fair Trade”. Senator John McCain (R-AZ) voted for NAFTA, CAFTA and other similar so-called “free trade” agreements that are putting Americans out of work. McCain’s response to people in Michigan was “get used to it.” McCain has sponsored multiple bills to advance goals of the Security and Prosperity Partnership and a North American Union agenda. McCain also voted for the 1st shamnesty for illegal aliens in year 1986.
  • Barack Obama’s stated (which was not praise for some Americans, but most certainly appeared as a denigration of people in “a lot of small towns”): “And it’s not surprising then they get bitter, they cling to guns, or religion, or antipathy to people who aren’t like them, or anti-immigrant sentiment, or anti-trade sentiment as a way to explain their frustrations”. Obama’s choice of the words, “anti-immigrant” is interesting, in a nation that is one of the biggest melting pots in the world, and it is unlikely that most Americans are “anti-immigrant”. It is more likely many (if not most) Americans are “anti-illegal-immigration”. There’s a big difference. And Obama’s choice of words, “anti-trade” is also interesting. It is unlikely most Americans are “anti-trade”. That makes no sense. It is more likely that most Americans are opposed to “unfair-trade” practices. Obama voted YES on free trade agreement with Oman (BILL S. 3569 ; vote number 2006-190 on Jun 29, 2006), even though Oman has bad labor laws, and the trade-deal contained some investment provisions even more damaging to the ability of government to act in the public interest than NAFTA or CAFTA.
  • Voters don’t like these “Free Trade” policies, yet the majority of U.S. voters continue to repeatedly re-elect the politicians that are selling Americans out.

At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Do-Nothing Congress with 85%-to-90% re-election rates finally becomes too painful.

Posted by: d.a.n at September 19, 2010 11:46 AM
Comment #308826

Regarding China’s currency, if the U.S. government doesn’t like China pegging their currency to the falling U.S. dollar, then perhaps the U.S. government should stop their blatant hypocrisy and stop debauching the U.S. currency by creating massive amounts of new money out of thin air, rampant borrowing and debt, and unfair trade practices?

At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Do-Nothing Congress with 85%-to-90% re-election rates finally becomes too painful.

Posted by: d.a.n at September 19, 2010 11:52 AM
Comment #308827

Roy, Regarding the taxes, right.
How about simply making it a flat percentage (say 17%)?

The majority of our problems are not that complicated.

The problem is too much short-sighted selfishness and greed.

Unfortunately, Congress is a FOR-SALE, incompetent, corrupt, ideological cemetery, where good ideas go to die in a maelstrom of bureaucratic hedging, rank favor-trading, corruption, and circular partisan warfare.

And watch out for Congress persons trying to promote the regressive 30% flat sales tax fraud.

At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Do-Nothing Congress with 85%-to-90% re-election rates finally becomes too painful.

Posted by: d.a.n at September 19, 2010 12:18 PM
Comment #308835

d.a.n if those aren’t good enough reasons to ‘vote out incumbents’ I don’t know what we could do or say. The most wealthy nation in the world converted to the largest debtor nation in a short time span of 20 or so years. Greatest xfer of wealth in human history, yet no accountability for the corpocratic politicians, many still at large.

Indeed, I’ve seen the ads where Neut is touting a ‘fair’ tax system. IMO, the corpocracy has no intentions of changing the tax policy, unless a flat tax plan begins to gain traction with the public.

I do believe that the people’s frustrations will be felt come November, spurred on by Glenn Beck, Independents, and TEA Partiers. So far as I can tell nothing has been done thus far to prevent the further loss of jobs or to create new jobs. That tells me that the corpocracy still has big plans for us, their job is not finished by a long shot. At the behest of the EU and other socialists leaning countries we will be pushed to join the socialist crowd. And, instead of moving away from this failed ‘free trade’ thing the corpocracy is going to stick with it. Status quo will rein so long as Americans will tolerate it.

For example: the TEA Party is for limited gov’t, pursuit of happiness, and one other feel good term. Does that encompass ‘free trade’, illegal immigration, socialist leaning gov’t by corpocracy, etc?

Otherwise, we have the Corpocracy we deserve.

Posted by: Roy Ellis at September 19, 2010 1:59 PM
Comment #308838

Roy, the corpocracy, (except for members of the retail industry), want an end to all income and corporate taxes to be replaced by a national sales tax (first choice) or a value added tax (close 2nd choice). The reason is obvious, it would shift a hefty amount of the taxation away from the wealthy and corporations and onto the breadth of consumers at large, leaving the wealthy free to shop overseas where tax rates may be lower or non-existent for their big ticket items, while the rest pay for more of vast number of government services the wealthy partake of, (and don’t usually even realize they do). A very large part of our federal government is dedicated to protecting wealth, big dollar financial instruments, transactions, investments, and holdings, and contracts, most of which the working poor and lower middle class can’t afford to participate in.

And there is nothing wrong with that; every government’s first duty is to protect the property holdings of its citizens. Who pays for that first duty is always a class conflict debate.

Posted by: David R. Remer at September 19, 2010 2:31 PM
Comment #308840

When 75% of the resources being used were for the benefit of America and its people, we thought it would last forever. As a result, we became greedy and selfish and took they way it is for granted. As our percentage of the resources dwindled, we began borrowing to maintain our lifestyles.

Accumulation of debt usually signals the beginning of the end for empires. They begin to make rational decisions, based on current situations, as a means of maintaining the status quo which perpetuates the downward cycle.

The real culprit is consumption, both government and more importantly consumer consumption indebtedness.

It has to be reduced, but it can’t be reduced, a classic ‘Catch 22’ and the only probable way out is collapse.

IMO, the notion that reducing the size and cost of government as a means of freeing up a mass consumption society which will lead us back to prosperity is a ridiculous one.

Posted by: jlw at September 19, 2010 3:57 PM
Comment #308843

jlw, Those are good observations.

And to date, no one has yet been able to answer this simple question:

  • Where will the money come from to merely pay the interest on over $57 Trillion of nation-wide debt, when that money does not already exist?

  • The National Federal Debt of $13.6 Trillion and growing fast.
  • The Social Security and Medicare systems are pay-as-you-go, with a 78 Million baby-boomer bubble approaching.
  • As of OCT-2009, the federal National Debt per-capita is $38,000, which is 75% higher than the previous record-high (which was $21,719 in 2008 dollars in year 1945, after World War II).
  • As of OCT-2009, the federal National Debt per-capita is $38,000, which is 705% higher than the it was near the end of the Great Depression (which was $5,396 in 2008 dollars in year 1941).
  • Nation-wide debt has grown from 100% of GDP in year 1956 to 400% of GDP today.
  • 90%-to-95% of all U.S. Dollars in existence in the U.S. already exists as debt, because new money is created as debt at a 9-to-1 ratio of debt-to-reserves (i.e. the fractional banking ratio for the U.S.). And today, a LOT of extra new money is being created without any reserves (to prop up bad banks and banks too big to fail). Eventually, the percentage of money that exists as debt will become near 100%, at which time pyramid-scheme begins (as you say) to “collapse”. The Federal Reserve and federal government may then start giving away money. At the moment, they are giving many trillions to banks and corporations at near zero interest. But eventually, they’ll realize that they have to give money to consumers too, since the economy is a 70% domestic consumer driven economy, and so many manufacturing jobs have disappeared. However, that will most likely cause hyperinflation, because the amount of new money required to service so much nation-wide debt, and keep a 70% domestic consumer driven economy from collapsing will result in the collapse of the pyramid scheme. You will need a wheel barrow full of U.S. currency to merely buy a loaf of bread. It has happened in dozens of other nations and it appears it will happen again in the next few years.
  • Americans have been liquidating for the past decade to service their debt. Foreign owned assets in the U.S. have almost quadrupled from $6 Trillion in year 1997 to $22 Trillion in year 2007.
Yet, for some people, they believe the solution for so much debt and our economic problems is more debt, borrowing, and spending!?! But those people still can’t answer one simple question:simple question:
  • Where will the money come from to merely pay the interest on over $57 Trillion of nation-wide debt, when that money does not already exist?

Here’s a clue. What is a mathematical certainty of all pyramid schemes?

At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Congress with 85%-to-90% re-election rates finally becomes too painful.

Posted by: d.a.n at September 19, 2010 4:53 PM
Comment #308857

Agree David, in that the system is set up to protect the wealth(y). WTO treaty is such that any action which reduces the future profitability of foreign investments constitutes expropriation. Puts profitability ahead of everything else, health, safety, human rights, labor law, fiscal policy, industrial policy, national security, etc. The ideology goes even further in that the government can no longer reserve provision of certain public services. Everything should be traded’ public broadcasting, public education, public health, water delivery and treatment, etc. Means Bechtel may end up controlling water and sewer or Mitsubishi running Social Security, etc.

Numerous laws benefitting US citizens have been struck down through such stuff. About 10% of trade agreements are ‘free trade’. The remaining 90% comprised of other things, tariffs, quotas , trade barriers, etc.

The WTO increasingly has seen fit to sit in judgment of most every kind of sovereign act, including US tax policy, foreign policy, environmental measures and public morals, etc. The result has been a loss of sovereignty for the US to enact and enforce laws benefitting US citizens. Example: in 2007 the WTO ruled that the Unlawful Internet Gambling Enforcement Act interfered with free trade in ‘recreational services.” Or, in 2006 Congress repealed the Byrd Amendment, 2000, that caused penalty tariffs in dumping cases to be paid to the victimized industries themselves rather than other nations. This, as a result of the WTO ruling the Amendment illegal in 2002 even though there is nothing in WTO rules that even mention what may be done with penalty money. In 2005, with WTO permission, the EU imposed a 15 percent retaliatory tariff on US paper, farm goods, textiles and machinery, resulting in Congress caving in 2006.

Since post WWII the US has run trade policy as an orphan to foreign policy. The Executive has set trade and monetary policy as in a foreign aid context. So it is today in dealing with China on currency manipulation.

Lots of wunerful stuff in store for us post recession. While we are playing with ourself over stimulus created jobs at $2M a pop the Germans are selling kitchens to the Chinese built on the metric and German standard sizing. So it goes.

Otherwise, we have the Corpocracy we deserve.

Posted by: Roy Ellis at September 19, 2010 7:44 PM
Comment #308879

Roy, I think it is worth mentioning that the WTO is heavily influenced by Americans in business and government. Much of what the WTO does, it does with the active participation and OK of its American delegates. Which, is another way of saying, the WTO is not an Americans vs. foreign nations organization. The WTO is an instrument of American business and government. It is illogical and unproductive to view the WTO as a foreign dominated entity negatively affecting American consumers and citizens. That simply is not the case, historically, or currently.

Though, as our debt grows to ever increasing numbers of foreign lenders, our central role in WTO actions may very well diminish, and that is of no small concern to many Americans now involved in analyzing our role in the WTO.

Posted by: David R. Remer at September 19, 2010 11:37 PM
Comment #308900

Right you are, David. Fletcher describes it as a good ole boys club where the rules of the game are analogous to a game of stickball being played by children on a vacant lot; its rules only mean anything insofar as they are enforced by the players upon themselves. Says International law is unlike civil law in that there exists no sovereign to compel the obedience of nations. So, its 10-15% free trade and the rest is more like the squeaky wheel getting the grease. And, as described earlier, where there are no rules they just invent some and continue playing.

The FDA made the front page yesterday in trying to enforce (force) WTO rules on the American public. Food labeling has been a contentious issue for years. Such as Canada having to accept US food exports containing 30 percent more pesticides than Canadian law called for prior to the 1988 US-Canada trade agreement. The EU now endures trade sanctions by the US for not relaxing its ban on hormone treated beef. Now the FDA is saying it cannot require a label on genetically modified food once it determines that the food/fish is not “materially” different from other similar food or fish such as salmon.
Genetically modified agriculture products have been permitted for years and engineered crops have been widely used in processed foods. People are now concerned about modified fish and meat products coming to market, salmon being the first. Of course, biotechnology companies are opposing labeling. Not one company advertises that their products are modified. Wild salmon is labeled ‘wild’ but most salmon is farm raised.

The use of GM foods has skyrocketed, 93% of this year’s soybeans is GM.\

More blatant yet, the FDA won’t let conventional food makers advertise the fact that their products don’t contain genetically modified ingredients. In 1994, the FDA warned the dairy industry that it could not use ‘hormone free’ labeling on milk from cows that are not GM because all milk contains some hormones. And, sending enforcement letters to food makers, including B&G Foods, told it could not use the phrase ‘GMO-free’ on it Polaner All Fruit strawberry spread label because GMO refers to FM organisms and strawberries are produce, not organisms. Told the maker of Spectrum Canola Oil that it couldn’t use a label that included a red circle with a line through it and the words ‘GMO’ saying the symbol suggested there was something wrong with GM food.

In brief, the FDA/WTO is telling you that you have no right to know where your food comes from or what it contains. If your Tilipia was raised in a mud puddle in China or the New River in Mexico you don’t need to know. Just suck it up and eat it like a man!

Otherwise - - -

Posted by: Roy Ellis at September 20, 2010 1:09 PM
Comment #308911

Roy, yes, we have reached the point where, if corporations can dream it up and produce it, the apparatus is in place to sell it by any means necessary, including false and deceptive advertising.

I am waiting for a Congressman of conscience to offer up a bill requiring labeling of all products harvested from the Gulf to labeled as such, only to receive no support at all from our representatives. We have been trying to avoid products from the Gulf. The only we can do that is to not buy any oceanic products at all. Consumers always have a choice in these matters, just not the ones consumers would prefer. So, much for government of, by, and for the people.

Posted by: David R. Remer at September 20, 2010 5:41 PM
Comment #308917

Couldn’t agree more, David. We’ve Lost much of our sovereignty to a clubhouse for international elites.

Beck points out that GM, after the taxpayer paid for their bankruptcy, is now looking at a new IPO and working to have China buy in. In summation, the taxpayer paid to relocate GM to China. The taxpayer paid for GM’s bankruptcy. And, the thanks we get is for GM to sell out to China.

Beck is finally catching up with me in that he is saying this socialist crap of ‘dedevelopment’ is an effort to turn the US into a 3rd world country. Here is a great video url presenting the socialist/Marxist on redistribution of wealth –
He puts the onus on the socialist/Marxist crowd and the Progressives where I spread it a little wider to include the Corpocracy. Says the Progressives have an agenda to destroy three things: churches, history and the Constitution.

Beck has said, for a year and half, that ‘dedevelopment’ is coming – a move to destroy capitalism and put us on a par with third world countries – level playing field and all that. He cites three happenings this week; GE passing the CFL lighting system to China, the Energy Dept looking to tell you what appliances you may have in your home and one other I can’t recall.

Otherwise, - - - -

Posted by: Roy Ellis at September 20, 2010 7:31 PM
Comment #308940

Wow, Roy! How you get from what we agree upon to a Progressive agenda to destroy churches, history, and the Constitution, is one helluva steep step off the cliff of reason.

Most progressives are Christians, and many of those attend churches. As for history rewriting, the bulk of that comes from political agents serving political ends for a profit from both extremes. As for the Constitution, it is those on the Right I hear calling for revocation and reform of Constitutional amendments, and rewriting it to mean what they want it to mean, One nation, Under Christians, By Conservatives, For Whites and the Values they can’t, themselves live by, and to hell with everyone else, they don’t count as they are UnAmerican.

Yeah, I hear this stuff from time to time from Glenn Beck the political tragic/comedic barker for the Right. Have to admire the P.T. Barnum in him to enrich himself so very much off the weaknesses of those who would buy his fear mongering and divisionist drivel.

I shouldn’t have to remind of you this, but, it seems called for. Greed and fame and power are non-partisan, affecting people from all walks of life and purported political persuasions, just like criminals are.

Its like Newt Gingrich throwing up completely false and dire paranoid delusions of Obama fostering a Kenyan anti-colonialist (read anti-white) agenda for the non-white take over the nation and distribution of White wealth to non-whites on racial grounds. It is bizarre, insane, and entirely out of touch with reality, and the ironic part is, Gingrich knows it, and knows the audience that will buy every word of it.

I have spent enough years in psychology and sociology to know, that such tactics and strategy have only fleeting effects, and the general majority of Americans will exact a price upon such barkers eventually affiliating such insanity to the GOP from whose constituents and barkers this garbage comes from. It is a fool indeed who underestimates the rational common sense of the American people. In the end, it is the Right wing barkers like Beck and Gingrich, and Tea Party candidates like O’Donnel and Angle, that will leave the American people choosing a Progressive agenda for working people, as the lesser of two insanities.

This is the kind of insanity that destroyed the Democratic Party with the advent of the Civil Rights enforcements, as the nutcases and xenophobes left the Democratic Party to join the GOP. The shoe is now on the other foot, and the elections will very likely reflect that fact. The majority of Americans don’t trust either party, but, in the end, they will fear the GOP far more than the Democrats.

You can look for Republicans to gain seats in November, but, along with that will come the public’s witness to the power of the GOP to make all matters worse by creating a truly do-nothing Congress as Tea Party candidates and Moderate Republicans prove unable to agree in the Senate with either each other or the Democrats, and they will grid-lock government, if not shut parts of it down, through gross inaction. That is what the public will witness as the 2012 elections come around. If you think that bodes well for conservatives, Beck has another fantasy he wants you to embrace.

The only way this nation gets back to solving more problems than it creates for itself, is by growing the anti-incumbent movement that will force the Left and the Right to the agreement tables in order to regain incumbent reelection power from the people, again. This hyper-partisan divisive hate and fear-mongering, takes our nation in the opposite direction, exacerbating and increasing the size of the problems our nation must overcome to salvage its future.

Posted by: David R. Remer at September 21, 2010 2:43 AM
Comment #308961

It’s never been clear to me why Beck is so down on Progressives. He claims there are Progressives in the right and left, believe he refers to McCain as a Progressive. He is pressing hard to get out the vote in November.

But, I do agree with your assessment of how it will go when the GOP ping-pongs to power. The corpocracy is on top of the world and will work to keep it that way, status quo. According to the talking heads the recession ended some time ago. Corporations are 70% recovered from the recession. A resounding jobless recovery, as we were promised. Keep immigration numbers and unemployment numbers high and it’s a win-win for the corpocracy. Over time the middle class workers will give up on wages and take those jobs that previously we wouldn’t take.

Why would people not want a 3rd party with a different political attitude; centrist/populist, acknowledging our religious heritage, safety net for the poor and disadvantaged, strong on environmental, health, safety and security, and education, work to abolish corporate personhood and money is free speech laws, invoke a flat income tax and a VAT trade tax, adopt a strategic protectionist trade policy, no corporate taxes, work for REAL campaign finance reform, and,

Establish a low cost Internet based party with mass communications capability for 24/7 dialog between candidates/politicians and party members/anyone-interested, membership oversight authority to hold politicians accountable, and party rules to ensure the party cannot be co-opted or taken over by the money influence or special interest.

If there was such a party surely I would want to join and vote thusly.

Otherwise - - - -

Posted by: Roy Ellis at September 21, 2010 1:09 PM
Comment #308976

Roy, the progressives think that corporations should be established for the common good and that we should return to the days of chartering corporations for specific purposes, and eliminate corporate personhood. The corpocracy sees them as the enemy.

Along comes Beck, accusing the progressives of creating the corpocracy and proclaiming them responsible for what has happened to our country.

The Democratic Party drove the progressives in the party to the back benches of power on behalf of corpocracy dollars which they need to be competitive with Republicans. Both parties have become totally dependent on the corpocracy dollars and both have to produce the legislation and the protections that the corpocracy wants.

An example of the political power that the progressives have: Obama took single payer off the table before he began negotiating with Congress for health care reform.

McCain is a progressive, a corpocracy progressive.

There is people progressive, such as single payer health care, a better deal for workers, both here and abroad, and controlling the corporations.

There is corpocracy progressive, such as NAFTA, the Chinese trade agreements and slave wage enclaves.

Posted by: jlw at September 21, 2010 2:59 PM
Comment #308990

Thanks jlw. The left and right Progressive seems an odd duck and Beck throws darts at both. I guess the split is over how to treat the corporate entity. And, perhaps one’s position on religion widens the gap further. I would assume the left Progressive is anti-free trade and the right Progressive pro-free trade. I know there are some dem’s that have had it with free trade but too small in number to make a whimper.

Chartering corporations for a specific purpose sounds kind of dubious. It really believe that if we could establish a party that can’t be co-opted, abolish corporate personhood, and implement campaign finance reform we would have removed the money influence from politics/government, putting an end to the corpocracy. By removing corporate income tax, and implementing a flat tax (17%) and VAT for foreign trade we would prevent gov’t from making winners and losers thru the tax code, simplify accounting/taxation and put the US on a more level playing field in trade.

Otherwise, - - -

Posted by: Roy Ellis at September 21, 2010 5:44 PM
Comment #308996

Roy said: “It’s never been clear to me why Beck is so down on Progressives.”

Perhaps for the same reasons, and there were many, that the Nazi’s were so down on “Juden”. It can be profitable. It can create a road to power via non-progressives. The ever present need for a fall guy, especially for one’s own foibles, weaknesses, and mistakes. Classic literature is chock full of such use of social groups who are defined by nothing more than the derogatory use certain words applied to them.

Roy said: “and party rules to ensure the party cannot be co-opted or taken over by the money influence or special interest. “

There’s a slippery slope. Any policy position any person or Party takes, will favor some special interests, and disfavor others. This is everywhere true in the Democratic and Republican experience, as well as Socialist, Green and Libertarian Parties. Whether a party is taken over by such special interests or not, the perception that the Party is being controlled or influenced by the special interests that would benefit from the Party’s policy positions will dominate the news about that Party in the absence of any scandal cycle or fabricated attacks.

The only way I can think of to deal with it, is to insure the Party’s membership as a majority back the policy positions and are aware of what detractors will attempt to do with the policy positions to undermine the Party in the public eye, as the Republicans are now doing to Democrats attempting to shift the failed economy on to the responsibility of Democrats. The failed economy occurred on Republicans watch, the end of the Recession occurred on Democrats watch; these facts are contorted all out of proportion Republicans and conservatives to reflect badly on Democrats. Democrats seem to be too inexperienced to counter these distortions politically, making it one helluva mess for confused voters.

Your new Party, Roy, will have to have the ability to withstand and overturn such attempts by both the Dems and Reps if your party begins to show any sign of becoming a political threat or liability to either or both of the other party’s political machines.

Posted by: David R. Remer at September 21, 2010 7:33 PM
Comment #309008

url from Gary Woods website, educational:

David, I have absolutely zero confidence in any political person saying they will do this or that, or abide by this or that. I believe there must be some rules of the road, just like the Constitution, laying the ground rules by which the game will be played.

Joel wrote a good article on Republic Sentry that purports that if you are against AVC you are also against the Constitution, unpatriotic. I agree with that. The Constitution is what it is and we can’t pick and choose what segments we will support, or not. It is unpatriotic to not support the call for AVC.

Posted by: Roy Ellis at September 21, 2010 10:47 PM
Comment #309020

Well, Roy, running around calling people unpatriotic and saying they are against our Constitution is not how one wins the support for a movement or new political party. It is fine to say that an action, or a position opposes the Constitution, or an action or position appears to lack a patriot’s support of American ideals. Go easy though on calling people who may be confused, under informed, or misinformed, enemies of the state or unpatriotic. You may want to pass this advice on to Joel as well. It is wise advice.

Also, be aware that the words we use, shape our thinking. If we use the wrong words to accurately state a case, those words result in our thinking about the topic ALSO being wrong. People think thoughts come first, then the words. Research demonstrates however, that this is a reciprocal feedback loop behavior - our words shape our thoughts, as well, and our thoughts shape our words. Which is another way of saying, we humans think in words. If our word choice is flawed, so is our thinking. It is extremely important to credibility that one’s words and thoughts be correct, accurate, and defensible.

There are many reasons people may be unsure or oppose an Article V Convention. Lumping all those reasons together as indictments of unpatriotic or anti-Constitutional thinking, I guarantee you, will not achieve the intended and desired results for consensus to achieve an Article V Convention.

Posted by: David R. Remer at September 22, 2010 2:46 AM
Comment #309024

Yes, a fault that many are afflicted with. Attempting to communicate on a complex subject with just a short brevity of sentences/paras. I do it all the time, knowing it hurts my position. Republic Sentry really needs a good writer or two but we aren’t there yet.

Joel may come across a little strong in his stance on AVC but I agree with his rational. AVC should take the high road in the coming debate. It’s politically savy to put the Congress on the opposing side relative to the Constitution.

Take, for example,the first amendment. If Congress refused to allow first amendment rights people would rightly get in their face on the issue. The first amendment is a valid part of the Constitution and there should be no questions about that. No different with AVC. While its not necessary or helpful to call one out directly on being unpatriotic it is useful to communicate such when addressing the AVC issue. I believe that is Joel’s intent. He was looking for some way to put AVC on the high road and I believe he has found it, IMO.

Certainly, there will be a long educational process in helping people understand that adopting AVC does not mean a rewrite of the Constitution and so on.

Whoops!! Cuttin it short agn, gotta run!!

Posted by: Roy Ellis at September 22, 2010 9:46 AM
Comment #309150

A year or so ago I posted on information from Barry C. Lynn’s book, ‘Cornered’ where China had created a monopoly in rare earth magnetics. One company remained in the US but somehow was co-opted to China a few years back.

China and Japan are having words over the Sea of Japan. Japan seized a Chinese fishing boat and in retaliation China is witholding the rare magnetic material from Japan. The US military uses some of theses products in missile war heads and similar.

The two economical giants were working on a joint gas drilling operation in the Sea of Japan and things were going well until the fishing boat incident. Things ratcheted up somewhat when it looked like China might drill unilaterally. The US steered clear of the issue so China halts exports of the rare earth magnetic material to Japan.

A great ploy for China to drag the US into the conflict. But, the larger question is why was China allowed to monopolize a rare earth material used in sensitive military applications in the first place. According to the NYTimes the House “The House Committee on Science and Technology is scheduled to review a detailed bill to subsidize the revival of the American rare earths industry and the House Armed Services Committee is scheduled to review the American military dependence on Chinese rare earth elements.”

Somehow, the US must find a way to help China and Japan save face and get on with drilling for gas. And, you can bet that the US taxpayer will take the hit, as usual.

All risks stops at the US taxpayer. Which is why corporations no longer conduct training for new employees except for proprietary knowledge. Corporations have had a couple of hundred years to become more ‘efficient’ and ‘harmonize’ the federal/state/corporate relationship. Where people once went to college for ‘a well rounded education’ they now go to get degreed in most any job position you can think of. If you spend a long time and lotsa money getting degreed in some niche area the corporation may not want to hire you. Your bad, especially when your niche degree isn’t worth much beyond that niche area of business. And, it hasn’t cost the corporations a dime of their money.

Getting degreed is not an option anymore. And, like d.a.n. blogged recently, the Corpocracy has worked hard to shut the middle class out of an education. Fifty percent of graduate students are foreigners and many on some kind of grant/scholarship, taxpayer funded, etc.

Some legislative dude was on tv yesterday talking up the idea of getting jump starting the housing market by offering citizenship, or expedited citizenship to foreigners willing to come here and buy a house.

Wonder what he was degreed in???

Posted by: Roy Ellis at September 23, 2010 10:10 PM
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